Credit Unions Must Innovate Quickly to Expand Deposits

Credit unions face a critical imperative: to grow deposits or risk falling behind.

With changing consumer preferences, the rise of competitors, and shifting market dynamics, traditional approaches to attracting deposits are no longer sufficient. Credit unions must embrace innovation and explore new strategies to expand their deposit base.

Importance of Deposit Growth

Deposits form the lifeblood of any financial institution, providing the foundation for lending and other revenue-generating activities. For credit unions, which operate on a member-owned, not-for-profit basis, deposits play an even more crucial role in fueling lending to members and supporting community development initiatives.

However, in recent years, credit unions have faced challenges in attracting deposits, particularly from younger generations. The emergence of payment-focused apps like Venmo and Square Cash App has reshaped consumer behavior, with many opting for digital alternatives to traditional banking services. This trend, coupled with the increasing popularity of digital banks and fintechs, has created a competitive environment where credit unions must innovate to remain relevant.

Why Credit Unions Need to Act Now

The data speaks for itself: while payment-focused apps and digital banks are experiencing significant growth in deposits, credit unions are lagging behind. A recent Mystery Shopper report by Curinos revealed that nearly half of all checking accounts opened in the United States were opened by digital banks and fintechs in the first half of 2023. This trend underscores the urgent need for credit unions to rethink their deposit strategies and adapt to changing consumer preferences.

Moreover, the traditional checking account, once seen as the cornerstone of the banking relationship, is no longer the anchor product it once was. Consumers, especially younger demographics, are increasingly turning to fintech platforms that offer a range of features beyond basic banking services. Without reinventing their product offerings and customer experience, credit unions risk losing market share and relevance in the long term.

Exploring New Opportunities

The time for credit unions to act is now. To unlock deposit growth and attract younger consumers, credit unions must be willing to try new things and embrace innovation. Here are some actionable steps they can take:

1. Enhance Digital Offerings: Invest in technology to improve the digital banking experience for members. This includes offering mobile banking apps with intuitive interfaces, robust features, and seamless integration with payment platforms.
2. Collaborate with Fintechs: Partner with fintech companies to quickly expand product offerings and reach new demographics. By leveraging fintech expertise and innovation, credit unions can introduce cutting-edge solutions that appeal to younger consumers.
3. Educate Members: Provide financial literacy resources and education programs to empower members, especially younger ones, to make informed financial decisions. By building financial confidence and awareness, credit unions can deepen relationships and drive deposit growth.
4. Embrace Data-Driven Insights: Utilize data analytics to gain insights into member behavior, preferences, and needs. By understanding member insights, credit unions can tailor products and services to better meet evolving demands and drive deposit growth with things like relationship pricing.

Let’s talk about how LendKey can help your credit union today!